1. Copyright 2009, Prentice-Hall, Inc.4-1 A Framework for Marketing Management Chapter 4 Creating Customer Value, Satisfaction, and Loyalty

2. Copyright 2009, Prentice-Hall, Inc. 4-2 Chapter Questions How can companies deliver customer value, satisfaction, and loyalty? What is the lifetime value of a customer, and why is it important to marketers? How can companies cultivate strong customer relationships? What is the role of database marketing in customer relationship management?

3. Copyright 2009, Prentice-Hall, Inc. 4-3 Building Customer Value and Satisfaction Customer perceived value (CPV)—the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives.

4. Copyright 2009, Prentice-Hall, Inc. 4-4 Determinants of Customer Perceived Value (CPV) Total customer value  Product value  Services value  Personnel value  Image value Total customer cost  Monetary cost  Time cost  Energy cost  Psychic cost

5. Copyright 2009, Prentice-Hall, Inc. 4-5 Loyalty A deeply held commitment to re-buy or re- patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.

6. Copyright 2009, Prentice-Hall, Inc. 4-6 Satisfaction A person’s feelings of pleasure or disappointment that result from comparing a product’s perceived performance (or outcome) to expectations.

7. Copyright 2009, Prentice-Hall, Inc. 4-7 Product and Service Quality Quality (or grade) is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. Forms  Conformance quality  Performance quality

8. Copyright 2009, Prentice-Hall, Inc. 4-8 Marketers’ Roles in Delivering Quality Correctly identifying customers’ needs and requirements Communicate customer expectations properly to product designers Be sure orders are filled correctly and on time Provide customers with proper instructions, training, and technical assistance Stay in touch with customers after the sale Gather customer ideas for improvements and convey them to the appropriate departments

9. Copyright 2009, Prentice-Hall, Inc. 4-9 Customer Profitability A profitable customer is one that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream for attracting, selling, and servicing that customer.

10. Copyright 2009, Prentice-Hall, Inc. 4-10 Customer Profitability Analysis (CPA) Best conducted with an accounting technique called Activity-Based Costing (ABC). Estimate all revenue coming from the customer, less all costs that go into serving that customer.

11. Copyright 2009, Prentice-Hall, Inc. 4-11 Customer Lifetime Value (CLV) Describes the net present value of the stream of future profits expected over the customer’s lifetime purchases.

12. Copyright 2009, Prentice-Hall, Inc. 4-12 Cultivating Customer Relationships Customer relationship management (CRM) is the process of carefully managing detailed information about individual customers and all customer “touch points” to maximize customer loyalty.  Touch point—any occasion on which a customer encounters the brand and product.

13. Copyright 2009, Prentice-Hall, Inc. 4-13 CRM Steps 1.Identify your prospects and customers 2.Differentiate customers in terms of their needs and their value to your company 3.Interact with individual customers 4.Customize products, services, and messages to each customer

14. Copyright 2009, Prentice-Hall, Inc. 4-14 The Customer Development Process Potentials Prospects First-time customers Repeat customers Clients Members Advocates Partners

15. Copyright 2009, Prentice-Hall, Inc. 4-15 Building Loyalty Interact with customers Develop loyalty programs  Frequency programs  Club membership programs Personalize marketing Create institutional ties

16. Copyright 2009, Prentice-Hall, Inc. 4-16 Customer Database and Database Marketing Customer database—an organized collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable for marketing purposes. Database marketing—the process of building, maintaining, and using customer databases and other databases to make contact, facilitate transactions, and build customer relationships.

17. Copyright 2009, Prentice-Hall, Inc. 4-17 Data Warehouse and Datamining Data warehouse—organized data where marketers can capture, query, and analyze it to draw inferences about an individual customer’s needs and responses. Datamining—statisticians extract useful information about individuals, trends, and segments from the mass of data.

18. Copyright 2009, Prentice-Hall, Inc. 4-18 Database Uses Identify the best prospects Match a specific offer with a specific customer as a way to sell, cross-sell, and up- sell Deepen customer loyalty by remembering preferences and offering relevant incentives and information Reactivate customer purchasing Avoid serious mistakes

19. Copyright 2009, Prentice-Hall, Inc. 4-19 Downside of Database Marketing and CRM Large investment Difficulty in getting everyone to be customer oriented Not all customers want an ongoing relationship Assumptions behind CRM may not always hold true

20. Copyright 2009, Prentice-Hall, Inc. 4-20 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall